28th August, 2011
Amidst the controversy generated by the approval of the state house of assembly to borrow the sum of N100 billion on Friday 26 August,and the criticism by Action Congress of Nigeria in the state,Governor Chibuike Amaechi has defended the loan approval.
Mrs. Ibim Semenitari,the state Commissioner for Information and Communication, said Governor Chibuike Amaechi had explained that the bulk of the loan would be used to make down payments before September 30, for power distribution projects that will ensure uninterrupted power supply in Rivers state by 2012.
“Whereas we have more that enough generation capacity, distribution is still insufficient”, ‘ the governor said. The loan which is being structured by GT bank will come at a cost of 8 per cent and is to be paid back in three years.
Governor Amaechi was quoted as saying,that the ” GT bank’s offer is right on time, as it has saved the state the need to borrow from the capital market at 12 percent.“We are saving four percent on cost of funds with this transaction,†Governor Amaechi said.
“With this loan from the GT bank, we will now be seeking to borrow N150 billion from the capital market, depending on our cash in flows,†he said.
The Rivers state government was planning to issue a shelf registration for N250 billion at the capital market. A shelf registration is a procedure that allows corporations or government (as in this case) file one registration statement covering several issues over a period of time. With the “registration on the shelf,†the corporation or entity can go back to the market with minimal procedure up to the limit approved, but often times may not necessarily reach that limit.
However with the N100 billion loan, the Rivers State government will not be taking up the N250 billion bond shelf registration.
Explaining further,Chamberlain Peterside,the Commissioner of Finance, said that” the state will only draw down N30 billion of this facility in the first instance, in keeping with prudential guidelines
“ The loan facility is a bridge loan that will be accessed if the need arises but only N30 billion will be require now given the single obligor limit rules do apply.
Peterside said,â€Rivers received a B+ rating from rating giants, Fitch and Standard and Poors, in 2010. The state’s fundamentals are quite strong and its financial outlook stable and promising”.
ACN had in a statement said that “despite the criticisms over earlier approvals for loans and bonds issued at the capital market by the governor, on Thursday, August 25, 2011the Assembly further approved the new loan package, thereby encouraging the governor to continue to run the state on borrowed funds”.
In a statement issued by the party in Port Harcourt and signed by its State Publicity Secretary, Jerry Needam, the ACN in Rivers State chided the assembly for its inability to check the excesses of the state executive but rather constantly massaging the governor’s ego, nourishing his whims and caprices, and mortgaging the future of the state without constraint.
The ACN lamented that, by the several loans and bonds opted for, Governor Amaechi has failed to operate the state budget, abandoning it in preference to handier cash which commits the future of the state into the hands of creditors within and outside Rivers State.
The party questioned why the governor cannot cut his coat according to his size and operate the annual budgets of the state but prefers counting his chickens before they are hatched by spending near trillions of state funds before earning the fortune.
The party also expressed shock that a state which budgets close to half a trillion naira yearly cannot execute developmental projects for the good of its people unless it acquires credit facilities.
The ACN wondered where Governor Amaechi has kept all earnings that accrued within the past four years of his administration, arguing that if state income had been prudently managed in the past, there would have been no need for the recent craze for loans and bonds for the development of the state.
By Okafor Ofiebor/Port Harcourt